M, KC formerly known as M, FY v. H,A formerly known as H,A

FCMC 10013/2020

[2021] HKFC 201

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10013 OF 2020

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J U D G M E N T
(Litigation Funding)

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The Background

1.  The parties were married in 2007 in Hong Kong. The children of the family namely two boys (‘the Children’) were born in 2008 and 2013 respectively. The older boy began boarding school in the UK in September 2021 and the younger boy currently attends an international school in Hong Kong. The husband (‘H’) as the petitioner therein petitioned for divorce under FCMC 4394/2020 on 4 June 2020, which was withdrawn by consent on 8 October 2020. The petitioner wife (‘W’) petitioned for divorce under the present proceedings on 30 October 2020. The Decree Nisi was pronounced on 2 March 2021.

2.  By the consent order dated 25 May 2021, it was ordered that the parties do have joint custody of the Children, with care and control to W and H do have defined access.

3.  By the summons dated 13 August 2021, W applied for maintenance pending suit (‘MPS’) for herself in the sum of HK$67,000 per month, and HK$75,000 per month per month as legal costs provision to be backdated from April 2021 until further order. The parties have subsequently reached an agreement on the issue of MPS. This is the hearing of W’s application for litigation funding.

W’s case

4.  In a gist, W’s case is as follows: -

(1)  W has no income. She has been unemployed for over 15 years and has been the Children’s primary carer since birth. She is entirely financially dependent on H.

(2)  She is suffering from post-traumatic stress disorder, clinical depression.

(3)  W has HK$829,136 in her German checking account but she cannot access this without activating her account physically at an ATM machine in Germany. She cannot feasibly travel there at this time. If H insists, however, that W reactivates her German bank account, she will need to travel to Germany and he will have to bear the costs of the same, including flight tickets, accommodation and quarantine costs. Further, the younger boy will be left alone in Hong Kong, and arrangements for his care will need to be made. This would be a wholly disproportionate costs in the circumstances.

(4)  Although W has HK$132,559 in her HSBC account, W intends to reserve this fund for emergencies.

(5)  Apart from the above, W has no easily realizable assets or financial means by which to provide for her own expenses.

(6)  In the premises, she has no readily deployable financial resources.

(7)  W is not eligible to apply for legal aid.

(8)  H previously paid W’s legal fees.

(9)  W estimated that she needs about HK$900,000 from now up to the FDR hearing. Assuming that it takes at least 12 months to reach the FDR stage, she will need the monthly sum of at least HK$75,000 per month to meet her legal costs.

5.  Simply put, H’s case is W has failed to satisfy the Currey test, to wit:

(1)  W has at least some earning capacity;

(2)  She has readily deployable assets;

(3)  She fails to show she would not reasonably be able to obtain legal services.

The Applicable Principles

6.  The relevant legal principles have been recently reviewed by B Chu J in LCYP V JEK [2018] HKCFI 1907: -

‘26. The Court's power to order MPS (including element for legal costs provision) is stated in section 3 of the Matrimonial Proceedings and Property Ordinance, Cap 192. The sole criterion stipulated by that section is "reasonableness", which has been said to be synonymous with "fairness" ⁵.

27. Wilson LJ had said in Currey v Currey (No 2) [2007] 1 FLR 946 ⁶:-

"In my view the initial, overarching inquiry is into whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means. Thus, to the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services. Furthermore, not to forget the third of Thorpe LJ's three features, she has also to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery. I would add, fourthly, that the court needs also to be satisfied that there is no such public funding available to the applicant as would furnish her with legal advice and representation at a level of expertise apt to the proceedings, i.e. that the applicant does indeed in that regard fall within the unserved constituency…"

28. In short, the overarching inquiry is into whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means and that:

•  (i) To the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services.

•  (ii) She has also to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery;

•  (iii) The court needs also to be satisfied that there is no such public funding available to the applicant as would furnish him/her with legal advice and representation at a level of expertise apt to the proceedings.

29. What was said by Wilson LJ in Currey was endorsed by Cheung JA and Hartman JA in HJFG v KCY [2012] 1 HKLRD 95 ⁷ who held that the Currey principles should in future be adopted as providing prudent guidance to both judges and practitioners in this jurisdiction.

30. Mr Yim had also referred the Court to the English case of A v A (Maintenance Pending Suit: Payment of Legal Fees) [2001] 1 WLR 605 , in which the wife who was dependent upon the husband applied for an order for maintenance which includes provision for legal costs. Holman J had stated as follows ⁸:-

"But Mr Singleton submits that the costs of the suit itself are in a different category. I do not agree. Just at the moment they are, after the provision of a roof over her head and food in her mouth, the wife's most urgent and pressing need and expense. She could manage without holidays, though I have made some provision for them. She could no doubt manage for a while without buying new clothes. She could manage for a while without buying new clothes. She could manage without her manicures, pedicures and yoga and keep fit classes, for all of which I have, on the facts of this case, made provision. She could even manage without the provision for forms of private medical care (to which the family has been accustomed) for, if necessary, she could fall back on the NHS. But she simply cannot make any progress with the dominating issue in her life if she cannot pay her lawyers, and for this the state will not provide ." (emphasis added)

31. As to why legal costs provision is particularly crucial in cases where there is a great disparity in wealth and earning capacity as a consequence of the marriage, Holman J had this to say:-

"This wife has always been dependent on her husband. She is locked into a bitter struggle with him, whose outcome is of intense importance to her. She has an acute need for good legal representation and in circumstances in which her lawyers do not lawyers have to be desperately economizing relative to the husband. He himself is spending huge sums on the litigation. He can, in my judgment, afford to pay the sums I have ordered and it is reasonable that I should require him to do so ⁹."

He then went on to say:

"In my judgment, in an appropriate case, maintenance pending suit provides a partial answer and, for the reasons I have now given, I made the order in the present case. I add that, since I made the order, the House of Lords has given its judgment in White v White [2000] 3 WLR 1571. That did not, of course, impact at all on my decision which I had reached and announced several days earlier, not on my reasons for it. However, Lord Nicholls of Birkenhead stressed, in relation to the substantive outcome, that there is to be no place for discrimination between husband and wife and their respective roles. In my view, that substantive approach may be illusory if a wife is unable to vindicate it due to the difference in their roles, and its discriminatory effect upon their income and capital and upon a wife's ability to match the legal representation of her husband. The changing climate for the outcome of matrimonial litigation, which the House of Lords has clearly heralded, further fortifies me in my view as to financing its interlocutory stages ¹⁰." ’

My view

7.  I take into consideration as follows:

(1)  According to W’s Form E dated 16 April 2021, she has the following assets:

a.    Cash in a HSBC account and a German checking account in the total sum of HK$964,706;

b.    Valuable jewellery including several pieces of diamond rings and stones;

c.    50% of a landed property in German jointly owned by the parties. The German property has no mortgage and valued by W at EUR 2.5 million.

(2)  W also has substantial artwork that she did not disclosed in her Form E but she accepts her ownership in her reply.

(3)  Notwithstanding W’s contention to the contrary, I take the view that her savings in the HSBC account are readily deployable assets.

(4)  Although W repeatedly alleged that she has to travel to Germany to activate her checking account, she has not provided any credible evidence to support her case. On top of the above, I take the view that she is unable to provide an acceptable explanation as to why she is not in a position to provide proof such as an email or a letter from the bank to that effect.

(5)  Being a German citizen and Hong Kong permanent resident, she can travel from Hong Kong to Germany and return. It is not disputed that when she travels from Hong Kong to Germany, she will not be subject to quarantine measures. As she returns to Hong Kong, she will be required to be quarantined at hotel for 14 days and home quarantined for further 7 days. So, W may have to leave the younger boy for about a month. Yet, there is no reason why the parties cannot sort out the care arrangements for the younger boy when W leaves Hong Kong. Further, W can fund the travel to Germany with her savings in the HSBC account. By reason of matters aforesaid, I take the view that W can travel to Germany to activate her bank account, if necessary.

(6)  I am prepared to accept H’s submission that it is possible for W to sell/ pledge her jewellery and/ or artwork.

(7)  H agrees to sell or mortgage the German property. I accept H’s submission that it is a bare assertion for W to say that it is unlikely that property can be mortgaged without either party travelling to Germany.

(8)  I am also prepared to accept H’s submission that W has failed to show that, without litigation funding, she would not reasonably be able to obtain appropriate legal services for the proceedings, such as by way of offering a charge on the outcome of the litigation.

(9)  I take the view that W’s estimate that she needs about HK$900,000 from now up to the FDR hearing is excessive. The court will not award historic unpaid costs unless the court is satisfied that without such payments W will not reasonably be able to obtain appropriate legal services in the future. Accordingly, the costs of the current application of HK$300,000 will not be taken into account for the purpose of budgeting the litigation funding, if any. Further, the estimate of solicitors’ fees of HK$50,000 and counsel fees of HK$30,000 for First Appointment hearing and HK$240,000 and counsel fees of HK$80,000 for FDR hearing is obviously on the high side. I propose a 60% reduction. In my estimate, W’s reasonable legal costs from now to the FDR stage should be not more than half of a million HKD.

8.  After having carefully considered the above, I accept H’s submission that W has readily deployable assets that are sufficient to meet her legal costs from now to FDR. Accordingly, she has failed to bring herself within the Currey test. All in all, I take the view that W’s application for litigation funding must fail.  

Disposal

9.  It is therefore ordered that W’s application for litigation funding be dismissed.

Costs

10.  I take the view that W’s present application is unmeritorious. I see no reason why costs should not follow the event. I would make an order nisi that W shall pay H the costs of her application for litigation funding including reserved costs with certificate for counsel’s attendance. The order nisi becomes absolute 14 days after this order is made unless a party has applied to the court for varying the order.